It can be argued that the current economic crisis was based on a number or separate but tangible factors. One argument relates to monetary policy over the past decade as being a key contributor to the downturn.

As interest rates were lowered by the Federal Reserve, borrowed money became increasingly easier to obtain. This enabled a broad range of economic growth to occur, one of which was new housing.

New housing starts are influenced and regulated by local governments who must issue permits for construction. The lack of checks and balances from local government to police the growth fueled the rapid growth of development. Some actually argue that local government was more concerned about increasing tax revenue, then being concerned about over development.

Source: Census Bureau ; News N Economics

In the chart above first reported by News N Economics, the housing bubble is clearly identified as beginning in 2003 continuing to 2006, reaching a climax of over 3.3 million housing starts. As interest rates were lowered after September 11 2001, contractors and developers borrowed without many limitations; the focus being to maintain growth, not stabilize it. New homeowners were able to borrow without the strict regulatory policies of the past and 4 million renters became owners.

So the question remains, did standards get lowered so the excess housing stock could be absorbed? There is antidotal evidence to support this claim and perhaps the simple answer is an analysis of the current foreclosure market. The current level of foreclosure is comprised of many of the first time home buyers and mostly in homes built in the past seven years.

Had this been regulated, would the economic crisis be as bad as it is? If housing construction was controlled and home ownership more tightly regulated, foreclosures, vacancies, distressed mortgages etc. might have been easier to absorb.

Fraud and bad debt were the offsets of a lenient monetary policy, but we believe that if one variable – the boom in housing starts – was controlled significantly, the economic bust would not have been as severe.

The question now is how do we learn from this continuing cycle, and prevent it from occurring once again in future? While interest rates were low at the start of the housing boom, mortgages rates have presently been at record lows. When the excess construction has been absorbed and values have hit bottom, what will be the outcome be?

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The Federal Government must return to constitutional form. We must return to the Gold Standard. No more easy money. and no more tampering with the Free Enterprise System.
It was the Government and the Banks who raped our economic system, sent a great percentage of our jobs overseas and decided that the Real Estate Boom would take the place of them. Of course it was an abomination. In fact what our government has done is robbed all of our life savings by devaluing the dollar.
No more the rule of thumb that said Never rent an apartment that was more then your weeks salary, No more an affordable visit to the Doctors office or an affordable Doctors house call.
Any one with a deep concern with what’s happening with our country should join Ron Paul with his Campaign For Liberty at http://www.campaignforliberty.com

Without the checks and balances that were put in place precisely to monitor these type of situations form occuring (or reoccuring), we are left with a free for all of reckless spending. What America needs to do is wake up, and pay attention to what is being allowed to proceed right before our eyes.